Latest properties marketed by MLP Surveyors http://www.mlpsurveyors.co.uk/ARTICLES_rss.php en-us There are a number of matters that need to be considered by a prospective tenant to ensure the premises they have found or hope to find will be suitable for their proposed use. It is apparent from the number of enquiries received from prospective new tenants that some are better prepared than others. Although most landlords hold the property purely as an investment it is also in their interests to ensure that the tenants are well prepared as it does not benefit them if a tenant runs into difficulties or the business closes. Set out below are some of the main points that need to be considered when selecting suitable shop premises. Planning Use The permitted use for most shops falls within Class A1 (retail). However, other shops may be within Class A2 (professional services – eg. insurance brokers, estate agents, banks). From 21st April 2005 the Town & Country Planning (Use Classes) (Amendment) (England) Order 2005 came into force. This was designed primarily to regulate cafes, restaurants and wine bars, which were all grouped in Class A3. This has now been split into new categories:- A3 – use for the sale of food and drink for consumption ON the premises      (restaurants and cafes)  A4 – use as a public house, wine bar or other drinking establishment  A5 – for the sale of hot food for consumption OFF the premises (hot food takeaways) You need to ensure the premises you intend to acquire has the correct consent for the proposed use. If you are taking over an existing lease check that the permitted use includes your intended use, otherwise you will need the landlords consent for change. You should also be aware that Planning Permission for change of use from one category to another may be required from the Local Authority. The District Plan sets out regulations to restrict the number of non-retail establishments in prime shopping frontages; you should check whether this limit has already been reached. Market Research With any new business venture you must undertake market research to ensure there is adequate demand for the goods or services you intend to offer. Check out the competition. The demand for shops is usually very strong which has increased rents significantly over the last few years. Harpenden, as an example, is a well known affluent area but is still subject to competition from surrounding towns. The increased level of rents now mean that some tenants are finding it hard to trade profitably, whilst others may continue to prosper. You need to try and establish the level of turnover you are likely to achieve, and from this assess the amount you can afford to pay for the rent, having regard to the other operating costs and level of profit required. Location, Location, Location! Get to know the town or city. Where are the strongest pedestrian flows? Are you reliant on passing trade or is your business of a type that customers will come to you? Naturally the shops in the busiest parts attract the highestrents but a secondary position may be just as good for you and save you money. Leases You should always take professional advice when renting or purchasing commercial premises. Will you be taking the unit over on a new lease or taking an existing lease where the terms are already established? Most shop leases are for 10 years or longer and include rent review provisions at periodic intervals. Usually a tenant is responsible for keeping the premises in good repair. A survey will reveal if the existing tenant has complied with their obligations, but similarly on a new lease you need to be aware that you may have to deal with existing repairs unless you take appropriate steps. Business Rates This is normally the tenants/occupiers responsibility. Each property has a rateable value (RV). The Government then levies a Uniform Business Rate (UBR) which is revised annually. The RV of each property can be established by ringing up the Council. Some relief is available for shops with small rateable values usually under £10,000, and you should check this with the Council. Legislation Be aware of your obligations as an occupier of business premises. Other matters to consider are the Disability Discrimination Act which came into force in October 2004. This means that service providers will have to consider making reasonable adjustments to the physical features of their property in order to overcome physical barriers to access. Will the property need to be altered to comply? Similarly in April 2004 the Asbestos at Work Regulations were introduced. You should check whether the landlord or present tenant has had an asbestos audit undertaken and if so obtain a copy. If not, you will need to arrange for this to be carried out. References When you take on a lease the landlord will naturally want to ensure that you will be able to pay the rent. If you are an existing trader the best demonstration of this will be references from your current landlord, bank, accountant and traders (suppliers) that you do business with. If you do not have these then the landlord will probably require personal guarantees (certainly if the tenant is a limited company) and possibly also a rent bond, perhaps three to six months rent, as additional security. Future Liability If during the course of a lease you want to re-locate or cease trading, you will normally have to find another tenant to take over the remaining term – this is called an assignment. Most leases will allow this, but the landlords consent is invariably required. They cannot usually withhold consent unreasonably but they do have the right to check that the new tenant is suitable and likely to be able to pay the rent. You also need to be aware that you will normally be responsible for the new tenant and it is therefore in your own interests to find someone who will be reliable. If their business fails or they do not pay the rent, the landlord may be able to seek recovery from you. Rental Levels As mentioned earlier the rents for most shops in this area have increased significantly over recent years. The main factor governing the level of rent is the position and size of the premises. Trying to find out information about the level of rent is not as easy as finding out the value of your house, as it can vary depending on the terms of the lease and the permitted use. You should take advice from a surveyor who is familiar with the locality to check that the rent is within a realistic range. If you are taking over an existing lease which has a rent review due in the near future, try and establish what the likely level of rent will be so that you can make provision. No-one said running a shop is easy, but too many tenants are ill prepared and cannot weather the storm when the market goes quiet. Do your homework thoroughly, take professional advice and hopefully it should be a rewarding experience for you and your customers.http://www.mlpsurveyors.co.uk/news.php?article_id=10Thu, 25 May 2006 09:49:00 +0100 They say that prevention is better than cure, which is more true in relation to maintaining your property than most other things in life. We all recognise the need to get our car serviced and have a MOT regularly to keep them in safe and reliable order, but rarely is the same approach taken about looking after what is probably your most important asset – your home. Planned maintenance can save you additional costs by preventing a small repair escalating into a significant defect, and it will also potentially eliminate unforeseen problems being found when you decide to sell. You may have read articles in the Press about the new Home Information Pack (HIP) which each property will have to have before it can be placed on the market for sale. An integral part of the Pack will include a Home Condition Report on the property which will be available to the purchaser before they make an offer to buy. The Government believes that if the purchasers were fully aware of the condition of the property before they agree to purchase then it should help to reduce the risk of the sale falling through. The Report will not be as detailed as a full Building Survey, but will still identify significant or major repairs that are required. At present the commissioning of a survey by a purchaser is optional and therefore many properties are being bought with a range of undetected defects. In 2007 nearly all property will have to be surveyed before it is marketed, therefore the need to keep your property maintained in good order is more important than ever before. We carry out many hundreds of surveys each year on all types of property and have built up a database of the most common defects found. These include: Chimney Stacks Roofs – tiled and those covered with felt Subsidence and structural movement Dampness – rising and penetrating Wet rot to external joinery Defective rendering or cement pointing to main walls Your home is usually your largest asset and it needs to be looked after. For peace of mind arrange a health check inspection. After all if it is good enough for your car it must surely be sensible for your home. We can tailor make an inspection to fit your property depending on its age and type.http://www.mlpsurveyors.co.uk/news.php?article_id=9Mon, 09 Jan 2006 15:27:01 +0000 The Government has passed legislation requiring the majority of residential property to have a Home Information Pack (HIP) prepared before it can be marketed for sale which is due to come into effect in 2007. The pack will contain a range of information, such as a draft contract, local Searches, copies of guarantees and details of any Planning Permissions or Building Regulation approvals relating to extensions or alterations.  In addition, the HIP will also contain a Home Condition Report (HCR), a form of survey similar to the current Homebuyers Survey, but  without a valuation.  The HCR will also include an Energy Assessment Rating for each property. All this information, as well as the HCR, must be prepared and combined into the HIP before the property can be offered for sale, either privately or through an Estate Agent. The Government believes that this will ultimately speed up the transaction and reduce wasted expenditure by the purchaser if a sale falls through. Currently about 25/30% of agreed sales do not proceed for one reason or another. The HCR can only be prepared by a qualified and licensed Home Inspectors (HI) (www.mlphomeinspectors.co.uk)  who have successfully completed a recognised training programme.  Even experienced Chartered Surveyors have to gain the new qualification. The HCR will highlight the condition of the property and alert purchasers to any repairs that are required.  The HIP will be made available to all prospective purchasers, so when they make an offer to buy, they will have all the relevant information available, which should reduce the opportunity for sales falling through at a later stage. HIPs will be assembled by Pack Providers (www.hipserv.co.uk) who can be instructed either through the owners appointed Estate Agent, their Solicitor, or directly.  It is expected that packs will take about a week to prepare and it will be illegal to start marketing until it has been completed and made available for inspection. The owner of the property will be responsible for the cost of the HIP but conversely as the costs on their purchase will be reduced, it should not increase the overall cost of moving, and has every chance of making the whole process faster and more certain. If you are thinking about selling your property before 2007 or indeed when the new system is launched, and you are concerned about its condition, it would be prudent to arrange for it to be inspected by a Chartered Surveyor/HI, so any significant repairs can be dealt with before the official HCR is prepared. After all, if your property is in good order you have a better chance of selling your home more quickly and at the best price.http://www.mlpsurveyors.co.uk/news.php?article_id=8Mon, 09 Jan 2006 15:25:39 +0000 Many of the flats built after the Second World War, and indeed more recently, were sold on 99 year leases. Consequently they may now have less than 60 years remaining. On the face of it this may not appear a problem, but it can create difficulties on resale and also affect value. Mortgage lenders normally require the lease to have about 40 years remaining after the mortgage has been paid off. As most mortgages are for 25 years, lenders are looking for 65 years or more on the lease. The Leasehold Reform Housing & Urban Development Act 1993 gives leaseholders, subject to certain qualifications, the right to require the freeholder to extend their lease by another 90 years on top of the current unexpired term. The freeholder can require payment to extend the lease to compensate for their loss. The amount is made up of the following criteria: The capital value of the ground rent income. The reversionary value, i.e. the amount of money which needs to be invested today to accumulate to the current market value with a long lease, when the existing lease ends. The Marriage Value – broadly this is the difference between the market value with the benefit of an extended lease, and its current value with a short lease. When a lease only has 50 or so years left, the difference can be significant and will continue to increase as the lease terms reduces. The freeholder is entitled to half of the Marriage Value. As such, the sooner a leaseholder applies for an extension the better. The new Commonhold and Leasehold Reform Act 2002, however, does not allow the freeholder to receive any share of the Marriage Value if more than 80 years remain on the original lease.Although there should not be any problem selling a flat with, say, 70 or 80 years left, it can make sense to consider applying for a lease extension before the term reduces to less than 80 years. Other Compensation – this is to compensate the freeholder for any other loss, such as future development potential, commissions on insurance premiums etc.Prior to the 2002 Act, a leaseholder had to have owned and occupied the flat for a minimum of two years before applying for an extension. Now, provided you have owned the flat for a minimum of two years you should be able to qualify. This concession is to help overcome the problems that many investors would encounter with “by to let” flats. The procedure for applying for an extension is set out in the Act. If the freeholder rejects the offer proposed by the leaseholder, the matter can be referred to the Leasehold Valuation Tribunal to determine the amount payable. Inevitably this takes some months, which is a good reason to consider applying for a lease extension before you are about to sell. Often the problem with short lease terms only becomes apparent when a purchaser has been found, which can result in delays and perhaps extra costs. The consequence of this is that you may end up having to pay the freeholder more than you really need, to avoid the delay of applying to the Leasehold Valuation Tribunal and to keep hold of your purchaser.http://www.mlpsurveyors.co.uk/news.php?article_id=7Mon, 09 Jan 2006 15:23:54 +0000 It is probably fair to say that the prospect of a forthcoming Rent Review is unwelcome from a tenant’s perspective unless they happen to be one of a small minority whose lease has upward and downward review provisions. From a landlord’s point of view it provides an opportunity of ensuring their investment is producing the best return available in the market. Like it or not, most tenants accept they have to pay a rent that reflects the value of their premises at the review date.  The problem comes in trying to establish what that rent might be, particularly if the market has been quiet and there have been few new lettings to give a clear guide. When assessing the rent, it is important to have regard to the specific provisions in the rent review clause. This may include certain assumptions that can affect the rental value. Currently most new lettings are on a short term basis but some older leases assume that the property is to be valued on the basis that it is available to let for a number of years equivalent to the original term i.e. 20 or 25 years. Depending on the type of property, few tenants will want to commit themselves for such a long term. Other considerations may include restrictions on the permitted use of the premises, the ability to sub-let part of the premises as distinct to the whole, and also the repairing obligations. Most tenants are responsible directly or indirectly for the repair of entire building but others may only be responsible for maintaining the interior. As such it would be expected that they pay a slightly higher rent to compensate for the reduced liability. There has also been a trend to include Break Clauses which give tenants some flexibility to re-locate without having to find another tenant to take over their lease. All of these factors can have an effect on the rental value. As the rent on review is usually based on comparable transactions it is therefore essential to ensure that not only are the physical characteristics of the properties similar but also that the terms of the lease are truly comparable. On the basis that the security of tenure provisions have not been excluded from the lease, the tenant usually has the right to request a new lease from the landlord. There are, however, limited grounds on which the landlord may be able to oppose renewal. Assuming these do not apply the tenant can normally request a new lease on substantially the same terms as before, apart from having to pay a revised rent. From a tenants point of view, a lease renewal can provide an opportunity to renegotiate a number of terms. The principal advantage is that the rent can go down as well as up, depending on the market – unlike upward only rent reviews. Effectively the existing tenant is able to stand in the shoes of a new tenant and secure the same terms as would be available on a new lease in the open market. As payment of rent represents one of the largest operating costs for a company it is essential that a tenant takes early advice if they have an impending rent review or lease renewal. Similarly a landlord will need to take action in good time in order to ensure that the rental value of their premises can be accurately assessed and negotiations commenced in good time to obtain the benefit of any increased rent at the earliest opportunity.http://www.mlpsurveyors.co.uk/news.php?article_id=6Mon, 09 Jan 2006 15:22:33 +0000 This is a word that usually strikes fear into the minds of sellers and purchasers. Thankfully, over recent years the number of subsidence cases in this locality has fallen considerably due to the wetter climate. However, hot, dry summers can re-ignite the prospect that subsidence claims may start to increase. In this region the sub-soil is principally clay, which is susceptible to shrinkage during long, dry periods. For that reason it is advisable to restrict the growth of trees and dense shrubbery near  a building as the roots can withdraw a surprisingly large amount of moisture from the sub-soil each day. When we have plenty of rain this is not usually a problems, but if we experience a drier than average autumn and winter, the sub-soil can start to shrink, resulting in a loss of support to the foundations. Although subsidence repairs can be expensive, in most cases the cost will be covered by the buildings insurance policy. The existence of a subsidence problem may only come to light when a property is being sold and the purchasers Surveyor finds evidence of cracks and structural movement. Often this can cause the sale to fall through, as mortgage lenders are hesitant to make a decision whether to lend until further investigations or monitoring have been completed. However, it must also be remembered that cracks can occur in buildings for other reasons such as thermal expansion and settlement, which are not usually of such concern. Similarly, not every case of subsidence results in the foundations being underpinned. It may for example be possible to remove dense shrubbery or cut back trees to reduce the amount of moisture being withdrawn from the soil, to stabilise the situation. It you are thinking of selling your property, it would be prudent to arrange for a Pre-sale Survey by a Chartered Surveyor to check if there are any major structural problems or other defects that need to be dealt with before the property is marketed. This can help to avoid problems when you eventually find a purchaser and increase the chances of the transaction going through.http://www.mlpsurveyors.co.uk/news.php?article_id=5Mon, 09 Jan 2006 15:21:36 +0000 For brand new houses we offer a detailed inspection, designed to provide you with a list of items which have either been overlooked, inadequately completed or are in some other way defective. An agreement can then be reached with the builder or developer to remedy these items prior to your occupation. Lists are sometimes brief (20 to 30 items) but can be lengthy (over 100 items). Examples range from inadequate decorations (normally easy enough to remedy) to defective flooring (extremely disruptive to remedy once you have moved in).http://www.mlpsurveyors.co.uk/news.php?article_id=2Fri, 06 Jan 2006 10:43:33 +0000 Choosing the right survey for your particular needs is as important as commissioning a survey. We have included brief descriptions to the various types of survey available below but would encourage your to contact us to discuss your particular requirements. We would not recommend reliance on the Lenders Mortgage Valuation. This is a valuation inspection, not a survey. Very often, the client does not even get to see a copy of the results. We regularly uncover defects and shortcomings, some of them serious, that have either been missed altogether or are not covered in sufficient detail by the valuer. The results can have major financial implications - a survey will avoid such nasty surprises. The way in which houses will be sold is about to change in 2007. We refer you to an article in the news section which outlines these changes.http://www.mlpsurveyors.co.uk/news.php?article_id=1Thu, 05 Jan 2006 16:48:02 +0000